 Welcome to the video. We're just going to do a quick recap of the big ideas live that I just did with Mike Munger I was really a fun time, and I hope you check out the full video. We've been talking about institutions and the poor and Just to get started on that what you may have missed if you didn't come to tonight's event What do economists and political economists mean when we talk about institutions? Institutions are mostly ways of reducing transactions cost of cooperation So Douglas North says that institutions are the humanly devised rules of the game that shape and direct human behavior That's a pretty vague definition But institutions range from big buildings and we tend to think of institutions as being buildings like the Supreme Court or the Congress or the United Nations down to the practice of standing in line when we show up for something and there's several of us All we want to go through the door at the same time rather than pushing and shoving we stand in line And it might be something like manners where one gender gets to go ahead of another or elderly people get to go first So manners are actually an example of institutions and it is anything from formal laws Constitutions that are written down to manners that help us organize things without even having to think about it are part of what We would call institutions Great so what are some common misconceptions that people have about institutions other than the fact that they may be Thinking of them only as a big building One of the misconceptions I think is where institutions come from because we tend to think of people as Starting institutions intentionally. That's not always true. Sometimes something like manners or standing in line just happens because it becomes a habit or a ritual or a A tradition and the other is that when we change institutions, sometimes we say we want to we want to change We're gonna end this institution and do something else. That's not what happens You go from something to nothing If you are if you're on the left-hand side of the road and then you try to drive on the right-hand side of the Road, it's going to be chaos so a lot of times in order to replace an institution you have to go through a period of chaos or It difficult to predict to understand because people's expectations are no longer so clear so in game theory terms Institutions are the equilibrium of fulfilled Expectations I do what you expect and you do what I expect when we move to a new institution We're not sure what to expect and so for a while We're stuck in a much worse situation changing institutions is more expensive than you would think Yeah, and we may not be able to predict what comes next So speaking of which what do you think are the major differences between? Intentions and outcomes when it comes to institutional design when we're trying to help the poor Well partly because of what we just said it's hard to predict what will happen People will respond in their own ways and so when you change an institution The result may be that something that used to work now no longer does and there's nothing to replace it So the what I talked about a bit in the video It used to be that with a private bus system in Santiago de Chile the trans Santiago Bus system was the system they have now They had private buses and people would wait in line for the bus. You always had the same bus driver You knew that this person Operated the bus you get on in the back you'd pay the money it would come back Everybody trusted each other But when the new bus system started you no longer were sure who the driver was a lot of people were trying to get on at Once and the line completely broke down So they expected for the old institution of standing in line being polite and trusting each other to continue They just thought we would substitute clean public buses for the dirty old polluting private buses That's not what happened what happened was that the the old system broke down completely and it took years to establish a new one and the wealthy people could take cars They had alternatives the poor people were damaged by this So the intention to help because of what Hayek and others have called the law of unintended consequence Means that the responses that people make are going to be hard to predict things are not going to improve as fast as You the planner think they are because people behave Unpredictably the advantage of institutions is that it gives predictability to our behavior We know that if we act this way other people will react in the same way a new institution You're gonna have to wait and see you're you don't know how it's gonna work And it tends to be the people with the fewest resources that are most damaged by that Unpredictability because wealthy people can insulate themselves from it often the the very policies that are intended to help the poor Are the ones who do the most harm to the poor? Okay, and that's just kind of a taste of what we talked about tonight My guest has been professor Mike Munger of Duke University. We've had a lot of fun So check out the whole video and check this out at feed org slash big ideas. Thanks again, Mike